New Jersey has formally asked the U.S. Supreme Court to resolve a legal dispute over whether states or federal regulators hold authority over sports betting on prediction markets like Kalshi. The state filed a petition on Wednesday, seeking clarification on regulatory oversight after conflicting federal court rulings left the issue unresolved.
New Jersey’s petition follows two key developments: First, the Third U.S. Circuit Court of Appeals ruled in April that all event contracts on prediction markets are derivatives regulated exclusively by the Commodity Futures Trading Commission (CFTC). Second, the Ninth U.S. Circuit Court of Appeals issued an opposing decision last week, stating that states—not the federal government—should regulate the industry. The Supreme Court’s decision to take the case would determine which ruling prevails.
In its filing, New Jersey argues that the Commodity Exchange Act does not strip states of their authority to regulate gambling within their borders. The state contends that prediction markets operating as sports betting platforms cannot bypass state laws simply by registering with the CFTC. “States have always maintained the primary police powers for health and safety matters, including for gambling,” the petition states. “Nothing in the Act gives the CFTC unprecedented authority to become the sole regulator of sports gambling in this country.”
Kalshi, the prediction market platform at the center of the dispute, disputes New Jersey’s claims. The company asserts that it operates as a financial exchange, not a gambling platform, and that CFTC jurisdiction preempts state laws. In a statement, Kalshi spokeswoman Dani Lever said the company remains confident in the lower courts’ rulings. “Kalshi is an open, nationwide financial exchange. It cannot be regulated by 50 different regulators,” Lever stated. “Both the Third Circuit and the District of New Jersey sided with Kalshi because the CFTC’s exclusive jurisdiction preempts state law.”
The legal battle stems from a broader conflict between 44 state attorneys general and the CFTC over oversight of prediction markets. While the CFTC classifies sports-related event contracts as “swaps” under federal commodities law, states argue these contracts function as sports betting and fall under their regulatory authority. Prediction markets, which allow users to bet on events ranging from election outcomes to corporate earnings, have seen sports betting account for 80% or more of weekly trading volume on platforms like Kalshi.
The Supreme Court’s potential involvement comes as the Trump administration has publicly supported the prediction market sector, adding another layer of political significance to the case. A decision by the high court could set a precedent for how financial exchanges and gambling regulations intersect across the country, with implications for both the prediction market industry and state-level gambling laws.